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Will Leap Wireless Beat Earnings?

Zacks Equity Research

Leap Wireless International Inc. (LEAP) – one of the low-cost wireless service providers in the U.S. – is set to release its first-quarter 2013 results after the closing bell on Apr 30, 2013.

In the last quarter, the company delivered a 47.02% earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Leap Wireless launched an array of attractive service plans for its customers. The company made its popular Muve Music service available to all Android-based smartphones at no extra cost and without any contract terms, hence improving its subscriber base. In addition, the company also launched a new handset financing program for the customers, which will facilitate them to buy high-end smartphones in installments.

On the downside, persistent loss of subscribers coupled with lack of spectrum and a highly leveraged balance sheet may act as headwinds for Leap Wirelessin the forthcoming years.

Earnings Whispers

Our proven model does not conclusively show that Leap Wireless is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: This is because the Most Accurate estimate is a loss of $1.65, above the Zacks Consensus Estimate of a loss of $1.21. This leads to an ESP of -36.36% for Leap Wireless.

Zacks Rank #3 (Hold): Leap Wireless’s Zacks Rank #3, decreases the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks earnings ESP of -36.36% combined with a Zacks Rank # 3 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

Research In Motion Limited (BBRY) has an Earnings ESP of +100.00% and carries a Zacks Rank #2 (Buy).

Comcast Corporation (CMCSA) has an Earnings ESP of +4.08% and carries a Zacks Rank #3 (Hold).

DISH Network Corp. (DISH) has an Earnings ESP of +1.89% and carries a Zacks Rank #3 (Hold).

Read the Full Research Report on DISH

Read the Full Research Report on CMCSA

Read the Full Research Report on LEAP

Read the Full Research Report on BBRY

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